2009 budget dead in the water

“It’s going to be a fiscal statement with a strong monetary policy touch,” Employers Confederation of Zimbabwe president, David Govere, said in reference to the influence monetary policy would have on the success of the budget.
While the expenditure needs of government stretch from the North Pole to South Pole, its revenue options are as terse as the shortest verse in the Bible, “Jesus wept” (John 11 verse 35), although they have a huge bearing on the direction the country’s economy would take.
And just as Jesus wept from a deep sense of the misery sin had brought upon men, Zimbabwe’s economy is shedding tears of blood because of the government’s inaction to deal with a catalogues of challenges confronting the nation.
Inflation is estimated to have reached the trillion percent mark — a world record. Unemployment is at 94 percent with professionals such as doctors surviving on less than US$1 per month.
Nearly 90 percent of the country’s population lives below the breadline with most sectors of the economy operating below 20 percent capacity.
Analysts do not expect Chinamasa to perform miracles.
They said the 2009 budget would be meaningless in the absence of huge injections of hard currency to support it.
“We don’t have to expect much. Look at what is on  the ground, we don’t have the resources needed if the economy is to be revived,” said one bank economist.
“Industry and households are not performing well and hence the government has to look beyond them for resources.
“This is unlike Malawi which has 70 to 90 percent of its budget largely funded by donors.
“What is needed for Zimbabwe is stability before we can grow and the injection of foreign money is critical.
“Using internal resources to support the budget can be inflationary,” added the economist.
Chinamasa would be seeking to encourage production by making the fiscal side sensitive to the needs of industry.
Tied to that, he would be seeking to offer some incentives for local companies to preserve jobs and the little revenue still being generated by the Zimbabwe Re-venue Authority.
He may consider closing the doors on foreign competition eating into the local market by raising customs and excise duty regardless of the country’s membership to regional trading blocs such as the Common Market for Eastern and Southern Africa, which are advocating for the gradual reduction of tariffs.
Excise duty on luxuries, particularly imported beer and cigarettes, might be raised to respond to the needs of conglomerates such as Delta, BAT and African Distillers.
Duty on imported second hand vehicles might also be adjusted upwards to protect the motor industry.
A few surprises may be in the offing as Chinamasa atte-mpts to extract more revenue from Value Added Tax, Corpo-rate Tax and Pay As You Earn. The revenue heads will however, not realise much because of rising unemployment and company closures.
The government will also try to come up with ways of raising revenue collected from companies lice-nced to sell goods in foreign currency.
The Liquor Lice-nsing Board might be forced to charge hotels, bottle stores and supermarkets punitive fees ranging between US$2,000 and US$20,000 to raise revenue re-quired to meet the government’s huge demands.
“This budget is more of a formality. It’s just an indicator which does not commensurate with the situation on the ground…with the dollarisation (of the economy), it means revenue has to be real revenue which is tax.
“So we are going to see a lot of taxes being introduced, tax bands being widened, the deepening of Corporate Tax, etc,” said one local analyst.
“But you cannot milk where there is no cow,” he added.
Chinamasa would also be under pressure to balance the needs of industrialists with those of the consumer who has little disposable income to spend.
Workers across the board are already demanding payment of salaries in foreign currency citing the informal dollarisation of the economy.
As it is, most teachers are still to return to their schools until their demands have been met. The same applies to health workers.
IPS quoted economic analyst, John Robertson, saying “the major crisis the country faces now is with the means of production that have completely been destroyed”.
Robertson said the budget should prioritise salvaging the country’s comatose economy.
Once the mainstay of the economy, agriculture has taken a nosedive over the last decade.
The government blames declining productivity on natural causes like drought and targeted sanctions against senior government figures.
Independent analysts believe the collapse is a result of the government’s fast track land reform programme that displaced most productive commercial farmers.
The export of tobacco, minerals and industrial products used to be pillars of the Zimbabwean economy.
In the mid-1990s, Zimba-bwe used to export hundreds of million kilos of tobacco, contributing up to 25 percent of the country’s foreign currency earnings.
This came to an end when government embarked on an often violent land reform programme at the beginning of the new millennium, displacing the majority of the close to 2,000 commercial farmers specialising in tobacco production.
Last year, between 50 and 70 million kilogrammes were harvested. The last significant tobacco harvest was in 2000 when 236 million kilogrammes of tobacco was harvested.
“Unless the means of production are addressed, there would be no budget to talk about. The budget can only be sustainable if there are sustainable means of production in place.
“This can only be possible once the issue of governance has been addressed,” stressed Robertson.